For purposes of record keeping, are entries in a diary proof enough or do we need to do some other form of record keeping?

—Sunita Singh

The monetary gifts received by an individual on the occasion of his/her marriage would not be treated as taxable income in his/her hands. On a conservative basis, it would be advisable to document the gift (for example: a legal document such as a gift deed especially when the individual gift amount is large) and place such document in your records. Any cash gifts received may also be documented (with details such as names of persons who have gifted the sum, and quantum), on a conservative basis. As the same may be sought by the tax authority in case questions arise. The total value of gifts received on the occasion of marriage are per se not income under section 56(2)(x) and hence not to be reported in the tax return as exempt income. There are schedules in the income tax return form that require details of exempt income to be disclosed. The nature of the exempt income is prescribed as interest, dividend etcetera and there is also a residual clause on other exempt income. Any transaction that is not income at the outset may technically not be required to be disclosed in the exempt income schedule.

I was unable to file my tax return for the financial year 2016-17 by the due date as I had to travel abroad for 3-4 months. My tax status is still resident. My tax liability last year was Rs2.5 lakh. Please let me know if I should file the tax for it along with my next year’s return or do so immediately? Also, let me know how much penalty is due, and about any other formality I need to keep in mind while doing so.

—Gajendra Sharma

Any income you earned in FY 2016-17 ought to be reported as income in a tax return filed for FY 2016-17 and not in the next tax year.

Since you missed this extended deadline, you will need to file a belated tax return for FY 2016-17 and you can file the belated return any time on or before 31 March 2018.

If your tax liability was not paid in full either by way of tax withheld (TDS) or advance tax, you could be liable to interest on delayed payment of taxes under sections 234B (at 1% per month from April 2017 till the end of the month when tax is paid) and 234C (will depend on timing of payment of advance tax instalments and TDS) of the Income-tax Act, 1961. Also, you would be liable to pay interest on any unpaid taxes, under section 234A of the Act for delayed filing of the tax return for FY 2016-17 at 1% per month from August 2017 till the end of the month when tax is paid. If you qualified as an ‘Ordinary Tax Resident’ and you held assets outside India (for example foreign bank account), such foreign assets will need to be reported in the tax return filed by you and any income earned outside India/from assets outside India will also need to be offered to tax in India. If you fail to file your FY 2016-17 tax return on or before 31 March 2018, the tax authorities may at their discretion levy a penalty of Rs5,000. Further, if you had incurred any losses on sale of capital assets etcetera, you may not be allowed to carry the same forward for set off against future income.

I had made some fixed deposits last year for 1 year each. On its interest, TDS was deducted. If the period of investment had been 2 or 3 years, would TDS still be deducted at the end of each year or only after that particular fixed deposit matures? Is it mandatory to pay tax every time my deposits mature or can I pay tax when I finally break the auto-reinvest cycle and redeem my investment?

—Anshul Rahstogi

The interest earned by a taxpayer from fixed deposits is fully taxable either in the fiscal year (FY) in which the interest accrues or the FY in which the interest is received (that is, when the fixed deposit matures), depending on the method of accounting regularly followed/adopted by the taxpayer. Further, irrespective of the period of investment, TDS is typically deducted by the bank at 10% on interest accrued in each FY, where such interest accrued exceeds Rs10,000 per FY. The bank remits and reports such TDS to the tax authority and you can check the details of such tax withheld in your Form 26AS.

You can claim credit for the TDS withheld by your banker in the FY in which you offer the interest income to tax (i.e. either the tax years of accrual or the tax year of maturity).

However, in case you wish to offer the interest income to tax only in the FY in which the FD matures (cash system of accounting), you will need to ensure that you have sought a carry forward of the TDS in each of the tax returns filed by you for FYs in which your banker has withheld TDS on such interest. The details of TDS will need to be reported in each FY in your tax return form and you will need to specify the amount of TDS carried forward and brought forward (as the case may be) appropriately, (Part C of point 19-Tax Payments) in each tax return form filed by you.